By Oliver Smith on Thursday 1 July 2021
CEO Dan Hegarty on why long-term mortgages are about to boom, what’s next for the property market, and Habito’s next move
The funny thing about property lending is that, even when you launch an exciting new product like a 40-year mortgage with unlimited overpayments and portability, it takes a while, years even, to really understand what the product means for homeowners.
Hence the challenge of interviewing Habito CEO and founder Dan Hegarty about the arrival of Habito One back in March, a novel 10 to 40-year fixed-rate mortgage, the likes of which we’ve never seen in the UK before.
“What we’re seeing,” says Hegarty “is actually the things that are most compelling to people about Habito One aren’t necessarily the things we imagined.”
Indeed, so far Habito One is finding traction amongst groups like older homeowners, those in their 50s who are looking for total repayment stability during the remainder of their mortgage.
Then there are freelancers, especially those with very lumpy income, who might pocket big pay packets every three or six months, and want to take advantage of unlimited overpayments during those periods.
And finally, younger homeowners, those maybe closest to Habito’s existing target audience, who are completing their second or third remortgage in five years, and are growing tired of the hassle and cost.
“I think the interesting thing about Habito One, and to some degree, the problematic thing is that it has many features that work together,” says Hegarty, who started Habito in 2015.
“So, for example, stable payments forever, that's clearly good. But, hold on, a fixed for life long-term rate, that sounds dangerous, what if rates go against me? But a benefit of Habito One is that it allows its customers to leave the deal, at any time, with no early exit fees."
Clearly, there’s still a vast challenge and opportunity to explain and educate consumers around how the product works.
And it’s almost difficult to believe that this six-year-old startup is writing mortgages that could very well still be operating in 2060.
But Hegarty is nothing if not optimistic on Habito’s chances, especially with the looming prospect of rising interest rates, he strongly believes long-term certainty will find a large audience among homeowners.
“We think Habito One's got the potential to originate multiple billions a year of volume, but we don't see it as a kind of universal panacea for mortgage holders.”
That Habito One also launched as UK property prices are soaring to new records, adds yet another element for house-hunters to consider in their understanding and calculation.
Speaking to AltFi at the start of May, with the stamp duty holiday rush still in full force, Hegarty said Habito had seen the usual seasonal patterns of property sales being “obliterated”.
“The number of London postcodes moving to non-London postcodes has doubled as a proportion of our overall population of customers.”
As a largely automated solution, Hegarty said Habito’s mortgage broking and conveyancing through Habito Plus had handled the surge, but warned:
“The property market is not built of tech businesses. So every conveyancing firm, every surveyor, the local councils, they are all trying to process a vast number of search documents.”
Whether the current market activity is simply a case of pulling demand forward 12-24 months, or if this is the property market’s ‘new normal’, Hegarty is wary to predict.
With mortgage broking through Habito, conveyancing through Habito Plus and now his own mortgage with Habito One, the obvious final question is what’s next for Hegarty and co?
The answer is firstly an expansion into new mortgage products, to diversify Habito One and use Habito’s unique position as broker, conveyancer and now lender to help underserved corners of the market with new kinds of mortgages.
Looking beyond mortgages, Hegarty says “the thing that strikes us, and it's sort of self-evident to say, but there's not really any benefit to being a homeowner... apart from owning a house.”
His line of thinking is that “secondary financial services” related to homeownership are a potential future avenue for Habito.
“The deeper and more long-term our relationship with our customers becomes, the more we think about different ways that we might make it advantageous for them to own homes.”
“Whether that’s helping them access the equity in their home for credit, for building that extension for the home office, or a broader range of other lending products that sit around that ecosystem of the home.”
For now, Hegarty declares these ‘secondary financial services’ are firmly in the “research phase” and won’t be launching any time soon.
Still, with customers today signing up for Habito One mortgages that run until 2060, Hegarty and his team have plenty of time to upsell.
28 March 2023
Amelia Isaacs